Macquarie Group: Credit rating downgraded

Macquarie Group Limited  (ASX: MQG) has seen its credit rating downgraded one notch from A to A- by Fitch Ratings, as part of the rating agency’s review of the world’s largest banking institutions.

Fitch stated that these rating actions do not reflect any developments specific to Macquarie, but result from a broad global review, and was prompted by challenges facing financial institutions globally, in particular those that are more exposed to market-oriented income.

The credit rating downgrade has had minimal impact on Macquarie Group’s share price, as it was flagged back in February 2012, and just brings the rating into line with other ratings agencies.

Fitch also stated that Macquarie manages funding exposure well, with a conservative liquidity policy and limited use of short-term wholesale funding.

Macquarie’s response

Macquarie Group’s Chief Financial Officer, Patrick Upfold, noted that the new Fitch ‘A’ rating is in line with Standard & Poors ‘A’ rating, which was reaffirmed on 1st December 2011. He also said that the bank had been proactive in addressing operating environment issues and regulatory issues, exiting a number of businesses, reducing costs and undertaking capital efficiency initiatives.

Big four banks ratings dropped already

The rating downgrade of Macquarie comes on top of ratings downgrades for three of the four major Australian banks back in February 2012.

Fitch downgraded its credit ratings on three of the four major Australian banks on 24th February 2012, because of their reliance on wholesale funding markets. Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corporation (ASX: WBC) and National Australia Bank Ltd (ASX: NAB) all had their ratings dropped to ‘AA-‘.

Australian and New Zealand Banking Group’s (ASX: ANZ) rating was already at ‘AA-‘.

While the rating downgrade should have little impact on Macquarie Group, any material weakening in the bank’s asset quality, capital and exposure to market risk may result in further negative rating action, according to Fitch.

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Motley Fool contributor Mike King doesn’t own shares in any of the companies mentioned. The Motley Fool’s purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Click here to be enlightened by The Motley Fool’s disclosure policy


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